Finally, first Indian Universal Bank will be born on March 31 2002. In effect, this means ICICI will become a bank on that day (provided the Reserve Bank of India gives it nod) fulfilling all the statutory requirements. In addition to RBI approval, this merger will be subject to various other approvals, including the approval of the shareholders of the respective companies, the High Courts of Mumbai and Gujarat, and the Centre.

The boards of ICICI and its 46 per cent banking subsidiary ICICI Bank on 25th October approved the reverse merger of the parent into the bank, the appointed date for which has been fixed as March 31, 2002 or the date of approval of the merger by the Reserve Bank of India (RBI), whichever is later.

Swap ratio will be one share of ICICI Bank for every two shares of ICICI.. The ADS holders of ICICI would, consequently, get five ADS of ICICI Bank in exchange for four ADS of ICICI, as each ADS of the FI represents five domestic equity shares, while each ADS of the bank represents two domestic shares. The swap ratio was based on the recommendations of the merchant bankers JM Morgan Stanley, appointed by ICICI, DSP Merrill Lynch, appointed by ICICI Bank, and the accounting firm, Deloitte, Haskins & Sells, appointed jointly by both the entities involved in the merger.

ICICI is going in bullet migration path towards universal banking instead of taking a gradual approach. The combination of easy liquidity and low interest rate regime has prompted the financial institution to follow this transition approach. ICICI had initially set a 18 month transition period for conversion into universal bank. However with the announcement that the merged entity will start off with the mandated CRR and SLR investments the transition period has now been reduced to 5 months.

The merged entity, which will have 11 subsidiaries, in order to adhere to norms laid down for commercial banks by the Reserve Bank of India (RBI) pertaining to cash reserve ratio (CRR), statutory liquidity ratio (SLR) would require a hefty Rs 18,000 crore towards its CRR and SLR obligations.

With this merger, ICICI Bank, the merged entity, will be the second largest commercial bank in the country after the State Bank of India (SBI) with assets of Rs 95,000 crore (September 30, 2001). SBI has assets of over Rs 3,16,000 crore. The combined entity would have 396 existing branches/ extension counters of the ICICI Bank, 140 retail financial offices and centres of ICICI and 8,275 employees.

ICICI’s holding of 46 per cent in its banking subsidiary would not be cancelled under the scheme of amalgamation, but is proposed to be held in Trust for the benefit of the merged entity. Financial institutions would have 20 per cent in the merged entity, with the foreign holding at 47 per cent and the rest with the public. ICICI’s 46 per cent stake would correspond to a 15 per cent stake in the merged entity.

At the time of the merger, ICICI Bank would align the Indian GAAP (generally accepted accounting practices) of ICICI to those of ICICI Bank, including a higher general provision against standard assets. Further, in accordance with international best practices in accounting, ICICI Bank has decided to adopt the “purchase method” of accounting, which is mandatory under US GAAP, to account for the merger under Indian GAAP as well.

After merger, N Vaghul, will be the chairman & K V Kamath will be the managing director and CEO of the bank. H N Sinor and Lalitha Gupte will hold the number two slots in the merged entity with both being designated as joint managing directors. Kalpana Morparia, S Mukherji, Chanda D Kochhar and Nachiket M Mor will retain their positions as executive directors.

The retail segment will be a key driver of growth for the merged entity, with respect to both assets and liabilities.The new entity will leverage on its large capital base, comprehensive suite of products and services, extensive corporate and retail customer relationships, technology-enabled distribution architecture, strong brand franchise and vast talent pool.